Skip to main content

tv   Squawk on the Street  CNBC  August 4, 2014 9:00am-11:01am EDT

9:00 am
it's ridiculous. >> it's former ceos. >> thank you for being here. "squawk on the street" begins now. good morning and welcome to "squawk on the street." i'm kelly evans live this morning with jim cramer and carl quintanilla and david faber are out today. we're watching to see whether it can hold up as geopolitical tensions hurt themselves. that could show up in the ten-year yield note. in the bid for treasuries, pushing that bid, even this
9:01 am
morning, still below 2.5%. as for europe, so much discussion over the weekend with what is happening in portugal. markets responding generally positively that portugal will use some of the leftover rescue funds to try to recapitalize a new bank there and we're seeing some credit spreads on the back of that as well. half an hour away from the market open. let's begin with the road map today. we take a look at markets with u.s. futures looking for a comeback, international tensions temper positive earnings news. >> investors continually reinterpret the current take on its consumer. >> and in an interview with the economist, president obama telling ceos they should quit complaining. >> so before we get to all of that, let's start here with the market, according to a higher open, selloff with the worst s&p
9:02 am
since june 21st, in fact. data showing growth in china sector but the shanghai market is at an eight-month high overnight. so jim, are you bidding up portuguese paper here? >> so many things went wrong. you had argentina, israel got hot and then suddenly you get anything and it's a relief. particularly because i think people didn't understand that portugal is loaded. >> i thought portugal couldn't handle this. what happens if another one goes down? >> the problem is, i think we all forgot, the european banks never did the stress test. when you see what is happening in russia, i think russia is the approximate cause of our decline. i know people want to focus on the fed because it's so much easier to talk about and so much accessible. but a european slow down is going to be quite evident and i think it's going to hurt the
9:03 am
banks there. >> by the way, you have the efo institute in germany saying that the sanctions are going to push german growth to zero. >> exactly. >> does the u.s. follow that lead or do you think people start to buy in after we have a selloff? >> the president not complaining to the business people. i think the sanctions that the europeans have embraced is when it gets colder than gas prongs, i think that's when the europeans are really worried about you a he think that would dramatically cause a huge gdp growth going negative there because they rely on russian natural gas. >> you have to stay away from american multinationals on this idea? >> that's what's happening. i think we have a certain point where we say, aren't they discounting this? i don't think you can discount it until you hear more numbers
9:04 am
like evo. and then the stocks bottom. i'm not a chartist but you go over the charts over the weekend and with the exception of a handful of companies involving health care, they are hideous. all of the big money thought the rates would go higher and the reality is the rates did go higher. i find that disingenuous. >> 3.2% s & p off the high. last week was a brutal week. >> yesterday was a terrible week. i come back and say that russia is being underrated by the financial news media because russia also means stronger dollar. the colgate conference call was not a good call and you hear that emerging markets are weaker. >> yeah, a bunch of them. proctor. >> i've been going over this with a cnbc contributor and i
9:05 am
liked proctor's call. i've been waiting for them to trim the branch. colgate's was just like, wait a second, guys, are you like kidding me? you're the best. don't hit me with the nonbest. and clorox, that was a really bad call. >> here's the question. august is not the best month in recent history. at the same time, some talk about the second half of this year will look like the second half of 2013. bonds outperform and then it shifts. do you buy what has worked so far this year or do you think people need to rotate and look at sectors, include staples? >> i would love staple's to lead but there has to be one decent number. i didn't like kimberly. kelloggs was a a complete disaster. >> kraft? >> the kraft call was
9:06 am
incredible. you guys thought we were doing good. you are clueless. we are not doing well. you read these conference calls and anything involved with food, the commodity costs are going high, people aren't eating our stuff and it's really awful. >> and they are raising prices. >> whole foods is not doing positive. i do believe that people -- the companies that make natural and organic are doing well. by the way, el pollo loco can be taken to 50. i don't think they deserve the chipotle multiple but think it does. >> going back to the point of whether cyclicals, do you think these are parts of the market that start to perform better, jim, or is this a wait and see? >> i think oil has come down so there was a budding retail trade
9:07 am
by the end of the week. gasoline is going lower. i think you need to see something but that -- and i put that as a positive because it's hard to believe that everything is going to continue to go badly. >> conviction. >> you need some leadership. >> we do have to talk about michael khors, 91 cents a chair. revenue coming in above forecast. the stock losing all of its initial gains, however, the current quarter is below estimates. so 24%, same-store sales, it looks good. >> that was last quarter. >> you're just not impressed -- >> i'm not impressed with a company that says they have more inventory than sales and a company that says gross margins are contracting and anything
9:08 am
other than beat and raise guidance. people read the headline and think cramer is crazy. you have to do more than read the headline. >> less than 1% this year. it's not having a year like last year. >> no. but you talk about difficult comparisons. you want the kind of comparisons that mobile is giving you? comparisons have been really difficult. by the way, it's really incredible. >> here's a company that puts up 17% -- it's not impossible. >> chipotle cannot be the leader in this market. i spoke with jack hart, the cfo after. it's like, wow, if what is good
9:09 am
for chipotle is good for america? no. >> under armour had a great chart and that was new technology. the technology is not just pcs. the technology that he's putting into his clothes is amazing. and you can measure how well you're doing -- he has a website that is just terrific that talks about how well your body is doing. for michael kors, inventory is lean, we're expanding and in china it's so great. under armour delivered fabulously. >> i wonder if we're going to hear from coach. worst performer in the s&p. >> they are paying out too much. >> where is it now? >> it's at 4. >> the clothing stores, they are laying off workers. >> maybe if they close every
9:10 am
store, the earnings will fly. >> spin out the real estate. >> coach has a lot of problems and kors is better than coach. let's see. at a certain point it's like whole foods. and then the number comes out and they are still buying ahead of the quarter and it's bad. >> worst performer in the s&p and second is whole foods. >> kroger has more growth than whole foods. >> crazy. >> some other earnings that we're going to hit, the latest quarterly results excluding certain items, carolina health. jumped 41% higher from the year earlier. what does buffett do with it? >> i think we're going to speculate what he's going to buy and it's going to be wrong but it's a great parlor game. general mills.
9:11 am
>> what about campbell? >> well, he's so clearly not going to give you any sort of heads up and i think to play that game when we're in a situation where earnings might be on the decline, it's a dangerous game. >> where is the biggest value to be had in the market? >> the biggest value might be the oil and gas limited partnerships that have come down on oil and gas but many of them are toll roads. i think the independent companies are exploring spectacular growth and oil has broken 100 and they are making a lot of money and can be taken over. if you look at exxon, there's a non-takeover independent. i think oil can provide the dollar to continue to go higher. >> berkshire has a couple of oil plays. they've got the rails and the guys making the safer rail cars
9:12 am
now. is this an area that you think berkshire could pursue further? >> i think trinity had a good quarter. i didn't think trinity would have as good of a quarter. i also didn't think the national safety transportation board would get in this and i think berkshire has a great path to business. >> he's very diversified and that's what analysts are saying, he's tied to the economy more so than the past and we saw the 4% growth number in the past week. >> allstate had a good number but the travelers did not have a good number. the insurers' stocks look like they are rolling over but berkshire was a good number. >> we should mention earnings season now that we're three-quarters of the way done. >> let's use pbg. that is the kind of stock that
9:13 am
is why did pbg start turning around because of a big turn in europe. if you lose europe, you're going to lose a lot. i think the perspective is that europe is going to be lost again. >> we should mention as well, profit margins, as companies continue to report these results, are at an historic high. whether they can hold up during the retail back half of the reporting season, we'll see. we're talking almost 10%. >> how about this. if you read on the tape right now, putin says to merkel, we're happy where things are, we just want to sort things out, everything i just said about the internationals is going to reverse. beware, that situation gets resolved. >> you're right. >> and it's not a -- everything like the big macro guys, it's september of 38 and the chamberlain is giving up. no, come on. and obama is not playing that way. >> and they have never been so
9:14 am
popular. that's going to continue to be the case ahead. straight ahead, president obama telling america's ceos to stop complaining. we'll have details on exactly what he said about the country's corner office, coming up, and we'll look at the futures. still holding on to positive gains after one of the worst weeks for the s&p 500 in more than two years. live from the new york stock exchange when we come back. collection is here. ummer ♪ ♪ during the cadillac summer's best event, lease this 2014 ats for around $299 a month and make this the summer of style.
9:15 am
9:16 am
9:17 am
president obama telling the economist magazine that corporate america needs to stop complaining. have a listen. >> i would take the complaints of the corporate community with a grain of salt. if you look at what our policy said then, they have generally been friendly towards business while at the same time recognizing their certain core interests, physical interests. if you look at what's happened over the last four or five years, the folks who don't have a right to complain are the folks at the top where we have made less progress than i would
9:18 am
like. >> this reminds me of first-term obama banker comments. what do you think, jim? >> okay. it's politics that i tend not to like to talk politics. >> it's business, too. >> the president is correct about the stock market. if you complain about that if we didn't have the rebound that people expected, too. so is the job -- i think he's alluding to the fact that a lot of our viewers who are not ceos would agree with, which is that ceos have done quite well during this period. do i think he's friendly in the business? that's a hard sell. >> two lines here that i think is capturing some attention around the proverbial water cooler this morning. one is where he says the economist says to him, do you really think it's true that ceos profess to be responsible as they say? this is president obama. there's, quote, a huge gap between the values and visions of corporate ceos and how their
9:19 am
lobbyists are in washington and then this line where he says, i'm not just trying to start resentment. feel free to keep your corporate jet, et cetera. i'm not concerned about how you're living. i'm concerned about making sure we have a system in which the ordinary -- >> that is the oldest -- that's the fact that the hamptons -- that's where you raise money. >> he said you can keep your lifestyle just the way it is. >> my house is in quad. do you think he meant the hamptons? >> yeah. >> i think so. how about hampton -- whatever. >> wherever you can do a fund-raiser. >> i think he's talking about the corporate folks. >> i was being a little more facetious. i think this is not going to go over well and it's also not that regulatory, is it? >> i'm thinking about the high-profile ceo comments. i think he's talking about the
9:20 am
ceos that come to the white house and complain to them. obviously we talk about it in conversation here but can you think of a national example of a ceo complaining to the american public about its treatment? >> recently. >> no, but they will complain off the record when the microphone is not on. he said, listen, executives, you do come to me more than you realize and i think that, again, that's different from what people think. the executives. it's so easy to say right now, i'd blast the president, he's wrong. but in spite of him, it's all because of the he had if. don't know. this is great parlor talk, absolutely. it's funny. i don't think anyone thought the president is business' friend. i think the stock market has gone up because of him. >> kind of the midterms. and paul krugman is defending him. >> i'm shocked. >> that was a shocker.
9:21 am
>> you said someone called him a and the man has opinions. >> you don't have to agree with him. up next, it's cramer's mad dash. taking a look at futures, we are rebounding a bit from last week's slide, the worst week of the year. the dow is set to open up more than 20 points. more from the new york stock exchange straight ahead. ♪ ♪ over 1.2 billion eyeballs are on us during the two weeks at wimbledon. true tennis fans want to know what's happening. they don't want to just see what's happening, they want to know and understand why it's happening. anybody can just put data up, but we want to get a reaction, make it far more interactive. we rely on the cloud to provide that immersive digital capability. give fans more then just the game with the ibm cloud. the ibm cloud is the cloud for business.
9:22 am
9:23 am
in today's market, a lot can happen in a second. with fidelity's guaranteed one-second trade execution, we route your order to up to 75 market centers to look for the best possible price, maybe even better than you expected. it's all part of our goal to execute your trade in one second. i'm derrick chan of fidelity investments. our one-second trade execution is one more innovative reason serious investors are choosing fidelity. call or click to open your fidelity account today.
9:24 am
♪ welcome back. the crowds are gathering for the opening bell. that means it's time for jim cramer's mad dash ahead of the opening market. jim? >> i get it, i get it, last week they were talking about the iconic iphone 6. it's a game-changer. on the visa call, charlie scarph talked about apple and charlie sharp is not -- no one is allowed to say, listen, we're doing business with apple because that means apple is going to call you and say, we told you not to talk about it. we just don't like it. this note makes so much sense.
9:25 am
mobile payments is the way of the future. every single retail is saying, we've got to have mobile payments. visa had a group of retailers very much involved in mobile payments. don't forget, visa has a fantastic relationship with almost every bank. this is something we're following, watching, and sharp is dynamite. i love the guy. >> and both shares are poised to open higher. >> we'll see what happens here as we bring in the open of the stock market when "squawk on the street" comes right back.
9:26 am
where the reward was that what if tnew car smelledit card
9:27 am
and the freedom of the open road? a card that gave you that "i'm 16 and just got my first car" feeling. presenting the buypower card from capital one. redeem earnings toward part or even all of a new chevrolet, buick, gmc or cadillac - with no limits. so every time you use it, you're not just shopping for goods. you're shopping for something great. learn more at buypowercard.com that's keeping you from the healthcare you deserve.. at humana, we believe the gap will close when healthcare gets simpler. when frustration and paperwork decrease. when grandparents get to live at home instead of in a home. so let's do it. let's simplify healthcare. let's close the gap between people and care. who found a magic seashell.
9:28 am
it told him what was happening on the trading floor in real time. ♪ the shell brought him great fame. ♪ but then, one day, he noticed that everybody could have a magic seashell. [ indistinct talking ] [ male announcer ] right there in their trading platform. ♪ so the magic shell went back to being a...shell. get live squawks right in your trading platform with thinkorswim from td ameritrade. welcome back. you're watching "squawk on the street" live from the new york stock exchange where the opening bell is set to open in just about 90 seconds.
9:29 am
jim, what are you watching? >> obviously, kors, because it's being discountable. that could be a negative tone. ebola is on people's minds and it's a company that we don't talk much about, they have something that might be fast-tracked by the fda. that's why the stock is going up. it's a bit of a mystery because it's early on but it could be done in connection with the d.o.d. there's something there. i know the fda came out and said they called for an expedited process. the fda is adamant, when you have something that is lethal and you have something that could save people's lives, they are not going to stay in the way of it. >> plus, we spent all weekend reading about ebola. >> and i'm afraid of that. >> i just read an auto wi og bi
9:30 am
over the weekend. i was going to be a doctor, in any case, and we're gearing up for the opening bell. and here at the new york stock exchange, etf celebrating its recent lists and it's not a merger monday. it's not the last couple of weeks. >> i picked some deal, just to throw them off. so i was playing -- >> faber sits over here, doesn't he? >> yes, he does. now, i would say that the only reason i like pike is because it's electronics distribution
9:31 am
play and that's another area that people are concerned about. i will have eaton on tonight. one of the things i don't like is where a company says it's not a disaster and the stock is down big. what is a disaster, if the stock is down huge, what does it have to be, cut in half? i don't know. we'll find out tonight. >> these things move around and i'm putting on my ceo hat here. the reason i put of merger monday, or the lack thereof, after the sharp selloff, it sounds like it was pretty quiet. do you think the rest of august, similar tone or not? >> i think that a lot of the p.e. firms believe the stock market moved up too much. i think that russia is just a total -- the ceo said something. it really kind of shocked people, took people's breath away, which is that mh-17, the
9:32 am
downing of the plane, might be a game-changer. a european executive of high-quality who says it may be a game-changer makes you feel like -- why don't we wait until we see if is. a street.com survey says 37% of people fear of flying international. we haven't even heard of insurance rates. just remember when the game changer talk is in the air, you tend to want to say, let's wait on that deal. >> we did hear a warning from adidas. that stock, if it's down 17% over the week -- >> there's one where they said, listen, everyone is going barefoot. i think there's competitors in that game, too. and i know under armour sells a lot of shoes. the barefoot analogy. do you like that? >> if people are wearing shoes,
9:33 am
they are wearing somebody's shoes. >> that's right. our sneakers last forever. >> they are also getting hit with golf. what is going on with golf? >> the only thing that they are talking positive is we saw that in the old days when cal low way didn't used to have a growth stock. have you guys met plank? >> i asked him, 90 times p.e., do you watch your stock price? he said he occasionally watches his stock price. >> let's take a look at some of the movers this morning. we've been waiting to see how they've traded. kors initially responded positively to a beat to the year before the bell. stock was up almost 7% and then turned negative to the tune of 3%. wow. it's down almost 5. >> swap out of kors and go
9:34 am
into -- by the way, brown foreman was another stock that had a really good chart. the only group that i see really climbing, the biotech, they've got a multiple myeloma drug. celgene is going higher. biogen, all still doing well. >> if you look at the best-performing group, financials. i'm a little surprised to see that. >> the european banks were strong, though. >> right. >> that's very good point. >> whether it's a bailout or a bail-in, they took it on the chin. the holders of the senior debt, they remained whole, so to speak. >> they did not have a good number. the bank was only supposed to do well when we see higher rates. it's interesting. let's see if that continues. it would be a leadership group.
9:35 am
>> treasury prices are stronger, yields are lower. >> let's look at the social media names moving. typically a pretty good gauge of risk. yelp reported earnings last week. it was not a universal theme here. yelp is under more pressure. that company is having trouble, stumbles in the latest quarter. >> i look at both gross margins and also local media on aggregate. the thing that people have to worry about when you sell or short y echlelp, they all want n you. you can short it until the cows come home. he's a smart guy.
9:36 am
yelp is the yellow pages with qualitative commentary. >> and there's speculation that is going to be taken out. >> look, lots of people are smart open table and that turned out to be crummy and be careful. another group that we really like, the drugstore chains. they have done really, really well. they are holding up well. >> what about the control express scripps has? manager excluding costs that are more but don't provide additional benefit. >> i don't know. i would not -- i would be caref careful. forget about it. don't bet against amgen. they paid a fortune for onyx and
9:37 am
i think it's starting to pay off. there's someone who knows why cardinal health is down and it makes me inefficient. >> well, one reason we can point to, walt disney is one of the best performers. did you see guardians of galaxy this weekend? >> i know someone who did. they say, wait a second, why don't we see what they report. don't forget, one of the biggest buybacks has done a pretty good job. it's held up better than almost any other stock in the dow. >> and let's get to the buyback for one second. this is always a hot topic when we're talking about the increase in earnings, people say, yeah, but there's been a lot of buybacks. true. apple, for example, has seen net earnings grow 12%, earnings per share, 17 or 18. the point being that buybacks are down from q1 to the tune of 30%. so again, the fundamentals in
9:38 am
this -- and this is the irony of the backdrop right now. earnings are pretty good. the economy story pretty good. geopolitical story, terrible. >> right. they can say, i did this, did i that. rates have flat lined. it's russia, okay? it's russia. and the ceos are very worried about russia. i talked to dudley, the ceo of bp and he's like, listen, we have ross net. we have a million barrels coming out per day. are we worried? it's our job to worry. and then he named four other places and i said, wow, i wouldn't want to go to these places. unlike the rangel ceo called me a sissy. he said, listen, this is where the oil is. you've got to do it. i said, have you talked to putin? not lately. >> 20% stock in rossa. >> you can't be clip. either -- all of the
9:39 am
companies -- was exxon -- exxon's quarter was so bad. product growth guys, i'm not slamming you. you know that the production growth was not good at exxon. but i just think that we have to be careful about russia because russia is a wild card. >> i do want to mention one thing. you said buybacks are down. ex spend turs are up 8% from last quarter. we've been waiting for it, right? >> yes. and that's part of why revenues are up. it's spotty. some spent a lot of money and some did not. we'll see. >> let's go to bob pisani who is on the floor. hi, bob. >> hi, guys. happy monday. we're being helped by europe. portugal is leading the way. they like what is happening there. portugal, germany, france, russia is to the downside. about the spanco bailout, it is
9:40 am
progress. the own citizen bailed them out at least we're getting progress. they are going to be stuck with the bad bang. eventually, they are going to lose a lot of the money. and the government is funding money for that. if you take a look here, is that a loss of your shareholder, it's 12 cents. in the last week or so, it completely collapsed. they are up a little bit here and most of the european banks are trading to the upside. i think there's real progress being made. i'm not arguing, there's still not a moral hazard. there is. what happen if they can't borrow any money from the central bank? they go to the european central
9:41 am
bank then. it's obviously not done yet but we'll see how this plays out. it's progress. that's my main point. let me move on to two companies that are darlings. they missed technically on a gap basis but closed sides down 4%. they didn't have as many sides that were closed. sales prices were up 6%. the amount of money that they made, that was up 3%. that was better than most people expected. that's why the stock is trading up right now. what really matters is mortgage availability. folks at 4.2 mortgage rates, if we go to 5.2 in the next three months, forget it. that's what is going to matter right now. there's michael kors. the stock was $100 a short while ago. now it's down 20% since then. margins were under pressure due to the markdowns but the earnings sales beat, up 20%, those are fantastic numbers overall.
9:42 am
stocks are down 20%. the market has already corrected for the idea that michael kors may be a brand that everybody is getting used to. finally, i want to note, earnings, we are 76% through the earnings season. right now, 9.7 earnings growth. we may hit 10%. and revenues, 5%. guys, we've had a very good earnings season so far despite a few high-profile misses. back to you. >> bob pisani on the floor, let's get a check of things on the floor. nasdaq leaving us higher today, leaving us lower last week. seema mody is joining us. >> they are worried about a larger correction and nasdaq finished its worst week since april. russell 2000 was brought down. this morning, bargain hunters are seeing the drop in price as
9:43 am
a good buying opportunity cht at least for now. you've got to go back to earnings. the tech companies that have projected earnings, 73% have beat expectations. one of the higher beat rates for the quarter and actual earnings growth, not blended but actual earnings growth north of 14% for the trek sectors. some of the traders i speak to say you've got to come back to the fundamental story and that is earnings. there was a notable drop in the large cap names that offered a dividend, perhaps being seen more vulnerable. on the other hand, many on the social media space, better than expected earnings from facebook. the groupon is reporting earnings. ipos from july, el pollo loco gained 14%. and after a strong listing last week it continues to move higher. by the way, 11 companies expected to ipo this week.
9:44 am
>> all right. the idea continues. now let's go to rick santelli. >> the lower yields part has been with us all year. the stronger dollar, i'm going with it's a weaker euro. now, if we look at the yield curve, we all know it's been nothing but flattened since really thanksgivings of last year. so let's start with a 13-month wide angle of tens minus twos. you can see that it is definitely a flattening trade. but if you just look at it over the last several weeks, a couple of things should jump out at you. you see that drop, that was the fed meeting. we did get a flattening there. but we've basically been lightening and steepening. things are changing a bit. let's look at a ten-year on a
9:45 am
two-day. we're well off the 258. as sarah referenced, here we sit at 247. three basis points off as the next chart shows, the lowest yield close of the year which was on the 20th of may at 2.44. the selling was much more aggressive last week but it didn't stick. let's look at a year to date of the dax. it's not down much today but it's certainly not bouncy. euro versus dollar, the pound versus the dollar, it explains what is going on. back to you. >> we have meetings later in the week. coming up on "squawk on the street," berkshire hathaway reporting a rise and the biggest cash hoard since 2008. we'll talk to industry insiders about what is next for the oracle of omaha and where he can put that cash to work.
9:46 am
and then, president obama telling ceos to stop complainingful carl fiorino will join us to talk about that. find yourself. in an accomodation where you get to do whatever it is that you love to do! ♪ booking.com booking.yeah!
9:47 am
in a we believe outshining the competition tomorrow quires challenging your business inside and out today. at cognizant,
9:48 am
we help forward-looking companies run better and run different - to give your customers every reason to keep looking for you. so if you're ready to see opportunities and see them through, we say: let's get to work. because the future belongs to those who challenge the present. i make a lot of purchases foand i get ass. lot in return with ink plus from chase. like 50,000 bonus points when i spent $5,000 in the first 3 months after i opened my account. and i earn 5 times the rewards on internet, phone services and at office supply stores. with ink plus i can choose how to redeem my points. travel, gift cards, even cash back. and my rewards points won't expire. so you can make owning a business even more rewarding. ink from chase. so you can.
9:49 am
mcdonald's will resume selling its full menu in china. >> it's kind of interesting, has anyone taken a view that the chinese, this is all part of a piece, that the chinese are making it very tough for american companies? >> does anyone think it's anything but that? >> well, you can't say that if you don't know if it's the case. >> well, it does seem that american companies are doing quite poorly in china. i'm not talking about -- look, it's horrendous over there. >> especially in the i.t.
9:50 am
sector. it's one thing if you're an american company and they say we don't know if we're going to let you operate because you might be spying but it's another to worry about the legitimacy of the food. >> it's aggressive news coverage of the story and making consumers aware of it more so than they would perhaps of a local company. >> maybe they have a first amendment? no. the chinese government tells you what to say. people don't understand, the prc, the supreme court, nothing gets written unless the prc checks off one. >> let me ask you what you do with the mcdonald sz on the backdrop of that. and crimea, they pushed mcdonald's out and started their own russian version of it. >> i was calling this the high water market of globalization. people didn't believe me. people keep waiting for mcdonald's to change around. i think the idea of eating healthy is such a powerful trend
9:51 am
that mcdonald's is such the irony. i think mcdonald's is going to be challenged based on what they serve. i think overseas they have gotten wise. coca-cola and other companies that they are getting wise to, people all over the world are getting wise that maybe this stuff is not good for them and that's playing a role in their bad comps. >> and they've had a decade runway where it takes time to catch up with the evolutions here in the u.s. or simply realize from the get-go that these items are not as healthy for you. >> the world is not as stupid as it used to be. >> the salt content is all bad. >> at some point you throw up your hands and say, you've got to eat something in the u.s. >> you sound like the people from zuetes. >> cat food? >> no, it's the company that
9:52 am
makes growth hormones. hey, listen, you've got to eat. all that is is the industrial -- >> let me put it this way, when i'm with my grandfather on a saturday afternoon, he's more inclined to go to one of these places. >> what, mcdonald's? >> yes. >> they used to call me panera sarah in high school. >> i call you eisenhower but now you have another nickname. "squawk on the street" will be right back. you used to sleep like a champ. then boom... what happened?
9:53 am
stress, fun, bad habits kids, now what? let's build a new, smarter bed using the dualair chambers to sense your movement, heartbeat, breathing. introducing the sleep number bed with sleepiqtm technology. it tracks your sleep and tells you how to adjust for a good, better and an awesome night. the difference? try adjusting up or down. you'll know cuz sleep iq™ tells you. only at a sleep number store, mattresses with sleepiq start at just $999.98. know better sleep with sleep number. the cadillac summer collection is here. ♪ ♪ during the cadillac summer's best event, lease this all new 2014 cts for around $459 a month or purchase with 0% apr and make this the summer of style.
9:54 am
that's why i always choose the fastest intern.r slow.
9:55 am
the fastest printer. the fastest lunch. turkey club. the fastest pencil sharpener. the fastest elevator. the fastest speed dial. the fastest office plant. so why wouldn't i choose the fastest wifi? i would. switch to comcast business internet and get the fastest wifi included. comcast business. built for business. welcome back. jim, gasoline? >> yes. it was only a matter of time that people would start talking about consumers having more money in their pocket. that's the chatter. kors is getting hit. that's why kohl's is doing much better than expected. do i like this trade? i don't know. we waffle. we have the early back to school
9:56 am
that you mentioned. >> atlanta kids, i know because i have family down there, today are back in school. unbelievable. >> they must be smart kids. >> they do get out in may. but that's a tough start. >> that's early. >> this is a new theme you're going to be hearing, which is that gasoline down, maybe the consumer is going to start doing better. >> the lowest gasoline prices start in august in four years. >> and then tonight, i've got eaton on. etn. >> jim cramer is going to be speaking with sandy cutler from eaton. recent losses on the concern of profit margins. find out what that says about luxury buyer. and then later, robert mcteer is going to join us.
9:57 am
"squawk on the street" will be right back.
9:58 am
just take a closer look. it works how you want to work. with a fidelity investment professional... or managing your investments on your own. helping you find new ways to plan for retirement. and save on taxes where you can. so you can invest in the life that you want today.
9:59 am
tap into the full power of your fidelity greenline. call or come in today for a free one-on-one review.
10:00 am
welcome to "squawk on the street." our road map begins with the markets in rebound mode after last week's selloff. have we seen a correction? >> michael kors out with a correction. now it's down more than 3. we'll have more on this reversal. and president obama says ceos should stop complaining so we picked up the phone and called ceos and former ceos speaking out this hour on "squawk on the street." we're going to start with the market. s&p was down from the highs after last week's selloff. as you can see, we are in rebound mode. the nasdaq is in the lead. here to talk about what is moving stocks onset at post 9, chief strategist. good to see you, john. >> great to be here. thank you, thank you. >> joining me here, john, all of
10:01 am
the cross fronts, portugal, you name it, higher interest rates. is any of it enough to make you rethink the trajectory of this market? >> no, because nothing has really happened yet. all of these things could happen. they are conditional. but things could work out, too. i'd rather see something concrete and something that interferes with our energy supply, something that relates to the energy. >> so what was last week? >> last week was a classic bull market correction in my mind. like summer storms, they come out of nowhere, they are nasty, hit hard, and then it is over. >> the fed exit eventually this fall, even if you believe the bull market will continue, the fact that money is coming out of small caps, out of high yields, what does that say to you? >> that is a little bit disturbing.
10:02 am
these are known unknowns. i think they are less danger rouse. we never know what is going to happen. those things are technical indicators and they always get my attention because most times i don't think technicians are a lot more than smoke in mirrors but they spot trends. i still think the fed is lining the company with ample liquidity and as long as that is the case, i'm going to default to positive. >> just looking at the commentary here over the weekend, we have jpmorgan saying, let's see, don't count on a correction any time soon. in other words, people here don't seem to bother. >> i think it's 4 to 7. that's what make as bull market. people may believe that they get knocked over real quick. that's why it goes down so
10:03 am
quickly. people change their mind very, very quickly. so i may be with them and it's always nice when you're alone on wall street. seldom get to do that. when i think it through, sure, you could have 5, 6, 7 any time. more than that, i find it really difficult to get there. >> do you think there's less tolerance for bad news now that valuations have run up and have finally come up to historic levels that are higher than the historic average? >> i don't think things are expensive but that's a god way of putting it. there's less tolerance. i'm paying for a nice vacation and want things to be nice and we want things to be nice. it's so quick and so sharp the way it sells off, i think that precludes the need for a real deeper selloff. >> so then what is the optimal valuation for the market? because for the first half of the year the conversation was the dow and s&p and nasdaq as indexes were not overvalued as a multiple of earnings. >> right. >> now we're getting to a point where we're in the 17 range and
10:04 am
people are starting to say, okay, maybe that is fair. what do you think is fair? >> i use the forward up and bottom number. and i think we're closer to 16 and 17. so what? it's not extreme. valuations in and of themselves matter at two times. when they are really, really low, like 1982, or really high like they were in 2000. otherwise, they are a nonfactor. >> do the yields work in the back half of the year, do they not work? i'm asking this against the backdrop of what is happening with rates right now. >> i don't think there's a real rush to sell them but i like yields but i like lower yield with strong cash with a chance of more cash down the road. >> such as? >> retirement. i like high quality companies, the sort of things that have low payout ratio that have strong cash flow, high quality. those sort of things draw baby boomers for the next ten years. >> can you name names? >> stuff like ibm and
10:05 am
hewlett-packard. those sort of things fit into what i'm talking about. >> john, if you see a 4 to 7% type of move on the downside here, can you be in russell stocks, smaller momentum players? >> well, i work for a funds group. i think it's good because i'm not really good at it. you can do it. some people are really good. some people have a gift. i don't have that gift. i view the 4 to 7%. unless i see a change in the fundamentals. >> what is your strategy given all of the headwinds from overseas? >> it worries me but these things have a way of working out and so far nothing is really cutting off the oil or gas to western europe to the united states. >> all right. john manley, thank you for joining us on a monday morning. now let's head it over to dom chu.
10:06 am
good morning, dom. >> good morning. the fda granted amgen an approval for multiple myeloma. back over to you. >> all right, dom. thank you. coming up, why we're set for a 20% correction in the market. the three indicators that could be pointing in that direction. and why kors is down more than 5%. and president obama telling ceos to stop complaining. ceos are going to respond. that's coming up. and startup ny companies will be investing hundreds of millions of dollars in jobs and infrastructure. thanks to startup ny, businesses can operate tax free for 10 years. no property tax. no business tax. and no sales tax.
10:07 am
which means more growth for your business, and more jobs. it's not just business as usual. see how new york can help your business grow, at startup.ny.gov i research. i dig. and dig some (trader more. search. because, for me, the challenge of the search... is almost as exciting as the thrill of the find. (announcer) at scottrade, we share your passion for trading. that's why we rebuilt scottrade elite from the ground up - including a proprietary momentum indicator that makes researching sectors and industries even easier. because at scottrade, our passion is to power yours.
10:08 am
you've been working like a dog if yall year.e me, but you don't need to camp out 'til labor day to reward yourself. mattress discounters labor day sale is on now! rest those tired bones on a queen size serta mattress and box spring set. right now, they're just $397. get 48 months interest-free financing on the entire
10:09 am
tempur-pedic cloud collection. not to labor the point, but this sale won't last long. ♪ mattress discounters welcome back. there's shares of michael kors dropping after it beat relative expectations. let's bring in stacy for more on this one. jim said i don't like the fact that inventory is higher than sales here. what do you think of this report? >> yeah, that's a nice 20-point swing on the stock there from top to bottom here. but i think the real thing that we talked about, even the last couple of quarters, is the fear that gross margins are coming down. the company has told us this quarter after quarter. don't expect this level to stay where it is. expect it to come down. guess what, their guiding
10:10 am
dropped in operating margin percentage, much longer than the street expected here. that's really why the stock is dropping here. >> stacy, there is a piece in the journal over the weekend cautioning that kors could become the next coach and the reason is that kors is discounting, doing so much of its business at the outlets. do you think, given the increase in outlet real estate and inventory on the discounted side, that there's a real risk of that? >> i think what they were looking at is wholesale and department stores and the company came out and they were incredibly defensive and said, hey, guys, we are not marking down or changing strategy here. there's a fear that the brand will become a bit overexposed. they are growing very fast. we've seen what has happened to coach. so there is that fear there.
10:11 am
and, of course, the outlets which really have hurt more the equity at coach are at risk here but the real fear again is in the real priced stores is there is something changing there. >> and as you expand aggressively, you lose the cache of your brand, whether it stays trendy. is there anybody that does this right, expand at top pace to drive top line growth but hits the nail on the head with the consumers and the people coming through the stores? >> in all fairness, kors is doing it right and they are nailing it here. but again, the problem is that in north america you sort of feel like you are seeing their bags everywhere. there is that fear that they are going to get overexposed. for them the bigger opportunity is actually in europe because of the price points and because they really are very fashion forward and competitive in europe. so there's a huge opportunity.
10:12 am
i think that they are, from a fashion perspective, really hitting it. they just have to be careful that they are not overexposed. and obviously they are in investment mode here. so while the sales equation is maintaining itself, we're starting to see all of the investment dollars take place and that's really, you know, what's making the street a little nervous here. >> so where do you see kors, stacy? 54% same-store sales growth in europe in the last year. is that sustainable? >> you know, i actually spend a good portion of my time in europe in stores and it is here. they have not even scratched the surface, particularly in germany, in italy, in spain, in the uk. they have a bit higher market share. but you go to the department stores in germany and they are the only game in town for a lot of the department stores. so they are really getting out in front of the consumer and
10:13 am
leap-frogging a lot of the other brands and making that statement at the accessible luxury price point and that's an important thing because they are in this middle ground that's still affordable but still cool and, you know, certainly the price points are not nearly where the true luxury brands like gucci and the rest. it's still affordable and still cool. >> so you'd recommend shares of kors at 76 and change in. >> i think you're going to have to be patient with the story. what is sending the stock down here is the gross margin issue and they've warned us quarter after quarter but when that actually happens, the street is never prepared for it and they he even said on the call today that they gave the analyst a little bit of a lecture, which is probably not serving them well here, saying, guys, you are just shocked at the reality of the gross margins coming down. we've told you about this and you're not focusing on the right
10:14 am
things. again -- >> ah, yes. >> the street is going to have to get used to the gross margin reality but probably elects turing investors on what they should focus on is probably not the best thing to do on the call. >> sign of tension for sure. >> a little tension. >> shares are down 7%. they were up more than that this morning after that call. so almost a 20% swing. >> makes a difference year to date as well. while we're talking about the consumer and we're three-quarters of the way done with earnings he's son, theresea trend. across the board we're seeing companies raising prices. let's look at some of the names. hershey's is raising 8% a pop thanks to comedy prices. mars which makes m & m and snickers, raising prices first
10:15 am
time since 2011. kraft has raised prices on cheese because of higher dairy costs. we've been talking about chipotle. higher prices for the menu. first time we saw that in three years thanks to the rising beef, cheese, avocado prices. the bottom line is, janet yellen may say that it's noise, pci, pce, but if you read between the lines of what these consumer companies are doing, prices are going up. >> when you look at this on a company by company basis, there's always a reason for the increase. our own food commodity costs are going up, our content costs are going up, even airlines raised prices this summer because of tsa squurt feecurity fees but d even matter? >> a company is raising prices around innovation and that's what companies are giving for
10:16 am
higher prices. nike, for instance, are coming out with new products. they point to the new frito lay snacks, salsa, they are on my desk back in new jersey. seriously, they say that the innovation is driving growth and it allows us to price things a little higher. >> do you bet on these -- from a macro point of view. you bet on these price hikes feeding into ultimately a pc measure or whatever measure you want to pick. >> they are broad. we'll see if the income growth, the higher wages follow through, which is where a lot of places are watching. >> the consumer is healthier. they can sustain these increases. >> that's the thing. companies are not citing demand for the reason. we'll see if nethey can actuall do it. >> interesting stuff, sarah. thank you so much. into wh .
10:17 am
when we come back, berkshire hathaway reporting a strong second quarter. what is warren buffett waiting for? we'll discuss on "squawk on the street" when we come back. yeah, i'm married. does it matter? you'd do that for me? really? yeah, i'd like that.
10:18 am
who are you talking to? uh, it's jake from state farm. sounds like a really good deal. jake from state farm at three in the morning. who is this? it's jake from state farm. what are you wearing, jake from state farm? [ jake ] uh... khakis. she sounds hideous. well she's a guy, so... [ male announcer ] another reason more people stay with state farm. get to a better state. ♪ then boom... what happened? stress, fun, bad habits kids, now what? let's build a new, smarter bed using the dualair chambers to sense your movement, heartbeat, breathing. introducing the sleep number bed with sleepiqtm technology. it tracks your sleep and tells you how to adjust for a good, better and an awesome night. the difference? try adjusting up or down.
10:19 am
you'll know cuz sleep iq™ tells you. only at a sleep number store, mattresses with sleepiq start at just $999.98. know better sleep with sleep number. ugh. heartburn. did someone say burn? try alka seltzer reliefchews. they work just as fast and taste better than tums smoothies assorted fruit. mmm. amazing. yeah, i get that a lot. alka seltzer heartburn reliefchews. enjoy the relief. yyyup. with xfinity internet soyour family can use all their devices at once. works anywhere in the house. even in the garage. max what's going on? we're doing a tech startup. we're streamlining an algorithm. we're going public! [cheering] the fastest in-home wifi for your entire family. the x-1 entertainment operating system. only from xfinity.
10:20 am
president obama has an important message to ceos. in an interview he said that they should quit complaining about regulations and show greater social responsibility. have a listen. >> i would take the complaints of the corporate community with a grain of salt. if you look at what our policies said then, they have generally been friendly towards business while at the same time recognizing there's certain core interests, fiscal interests. if you look at wa hhat has happd over the last four, five years, the folks who don't have a right to complain are the folks at the top where we have made less progress than i would like.
10:21 am
>> pretty scathing comments from the president. joining us is bill george, professor at harvard business school. bill, thanks for joining us last minute. >> thank you. >> so does the president have a point? we're seeing the longest stretch of monthly job gains since the 1990s, the stock market is at record highs. are you offended? >> well, i think the president is not leading these days. he's not in a god mood and he showed showed that in the press conference last week and as my mentor who passed away last week tragically at the age of 89 used to say, it's a leaders job to communicate passion, hope, and inspiration to other people. unfortunately, the president is not doing that and is playing the political game. i don't think you find any ceos that i know and i know a lot of ceos, who would say that this
10:22 am
president and this administration is friendly to business. i think business has coped very well in spite of a white house that's had no fiscal policy and has been quite negative towards business. >> well, that's partly congress. congress is to blame as well, bill. two of the topics that come up is obamacare and dodd/frank. are those actually strangling business? >> well, clearly there's no question that dodd/frank is constraining the financial community but we needed to make a lot of changes in the financial community and some regulations are definitely necessary and we're still working through those. but we need great global financial corporations. as far as the obamacare, i think the jury is still out on that. we haven't faced the fiscal consequences of it. i think we're coping pretty well and exchanges are working better than everyone had feared. i among them. and i think that's a wait and see.
10:23 am
whoever thinks they are booming, we need to take the lid off. look at the i.t. industry. we won't let people higher master and ph.d. candidates and who educated in the united states and are getting sent home. if we can't resolve immigration at the border with the illegal immigrants, let's solve the legal immigration so we can continue -- >> we don't have much time. i wanted to say, he did say that he thanks the corporate community for drawing interest in that issue in a positive way but one of the issues raised is he says he thinks there's a disconnect between what ceos say about how much they care and what they are privately lobbying for. if you say you care about the environment and education and immigration reform, get your lobbyists working on those issues. >> it's not just lobbyists. i think you have to work together with the ceos directly and most ceos are very
10:24 am
discouraged. there's a lot of talk about nothing gets done. we've got to resolve the issues like pat tree ating cash overseas. $140 billion earning less than 1%. we've got to resolve these issues and get on top of the tax code issues and the fiscal issues and free up companies. if we could free up the energy industry right now, we could solve a lot of the geopolitical but shipping liquid and natural gas to germany, canada and mexico are willing to do that. why can't we open up a free flow? i'll say this about business. it's done a brilliant job of globalizing its businesses and being very productive in the u.s. and figuring out how to win. look at the automobile industry. in spite of all of the problems that mary barra has had at
10:25 am
general motors, their revenues are up. i think business is booming right now because of the leadership in business and i just wish the president would work with those leaders directly, not through the lobbyists. >> yeah, in spite of that. thank you so much. >> thank you. warren buffett is sitting on his largest cash hoard since 2008. here with some insight, jay gelb and jeff matthews. welcome to you both. jay, first to you, is there some discussion about where this cash might be put to use? what does buffett have his eye on? >> our sense is that with $50 billion in cash on the balance sheet, 26 million of that is available for deployment in acquisitions. even so, if berkshire were to raise more debt or sell down equity investments, he said at
10:26 am
the may investor meeting, i was on a panel asking questions, that berkshire hathaway could fund the $50 billion acquisition. they are still in the market for a large deal. >> are you surprised that they haven't done one yet? >> the biggest one we saw last was several years ago for burlington northern railroads which worked out extremely well. yes, we're still waiting but our sense is that unless they see a compelling deal, berkshire won't move to buy anything substantial. >> because jeff, warren buffett knows better than anybody, why don't you think he hasn't done a deal here? not seeing something interesting out there? what do you think is going on? >> those two points exactly. he hasn't seen anything that is compelling at a price that's compelling. you've got to understand, warren buffett doesn't buy stuff just to buy stuff like a lot of
10:27 am
companies do. he's not in this for a short term. he's not in this to make next quarter's earnings look good and he's not in this to get cash in the balance sheet like a lot of guys do. he's in this for the very long term. he's looking for things that are going to satisfy berkshire hathaway's need for great businesses in the long run. so i would expect when he finds something he'll jump on it. if he doesn't see anything at the right price, he'll wait. >> in the meantime, it seems that he sold out nearly $3 billion through equity sales and only bought $2 billion in equities. i know he's choosey but do you get the sense that he's holding back for the moment? >> on the equity side, his equity portfolio, that's a function of where the stock prices are and how those have
10:28 am
changed relative to what happened with the individual positions. gm, he sold off a bit of that. i don't think gm is a sustainable berkshire hathaway investment for the long run and i think he's seen that and they are selling stock in gm, for example. >> i wonder -- sorry, jeff. go ahead. >> no. it's fine. >> i was just going to ask, if we're all supposed to be doing what warren buffett does, what should retail investors be thinking, jay? >> well, you know, for berkshire hathaway, what we tend to focus on is operating earnings growth and book value per share growth. in the second quarter, both those metrics were strong again. 10.5% operating earnings growth year over year. 3% book value growth versus the prior quarter. our outlook is for roughly 8 to 10% operating earnings growth over time and 10% book value growth. so when you look at berkshire hathaway shares, buffett said he'll buy back billion of
10:29 am
dollars in stock and we think there's a strong support level for the stock going forward. >> okay. jeff, just last thing before we go, same question to you. what do you think the retail investors should be thinking? >> well, he's the smartest inreceive stoi investor in the world. if he doesn't see things to rush out and buy, i think it's a signal for the market as a whole. >> he already said it's fully valued. thanks very much, guys. appreciate it. meanwhile, plenty of headlines in the middle east. jim maceda is in tel aviv. a bus was attacked by a bulldozer in what can you tell us about that? >> reporter: that's right, sarah. the driver of the large bulldozer died after being shot repeatedly by jerusalem police. that, after ramming his vehicle into a large, though empty, bus.
10:30 am
israeli police say the bulldozer also crushed a pedestrian nearby who later died. seven others, we understand, are still in the hospital, ard coulding to heal coulding according to officials. they believe this was palestinian involvement, especially at a time of ongoing conflict. minutes ago, in fact, at the top of this hour, a humanitarian unilateral cease-fire ended. israel allowed food and medical aid to come into gaza and to encourage the displaced gazans to return to their homes, though few were trying that. of course, palestinians and militants rejected it outright calling it, quote, a diversion from ongoing israeli massacres.
10:31 am
gaz g gaza officials claim that a house was shelled wounding 29 and killing an 8-year-old girl. on its side, idf claims that four rockets were fired at the gaza strip. >> another attempt at a cease-fire. jim maceda, thank you very much. we'll follow the headlines out of the middle east, israel, and gaza. when we come back, over the past 45 years, the stock market has lost more than 20%. each time you've seen these three warning signs. guess how many are flashing today. some bearish advice on the other side of "squawk on the street." dow is up 13. if you have moderae rheumatoid arthritis like me, and you're talking to your rheumatologist about a biologic... this is humira. this is humira helping to relieve my pain. this is humira helping me lay the groundwork. this is humira helping to protect my joints
10:32 am
from further damage. doctors have been prescribing humira for ten years. humira works by targeting and helping to block that contributes to r.a. symptoms. humira is proven to help relieve pain and stop further joint damage in many adults. [ male announcer ] humira can lower your ability to fight infections, including tuberculosis. serious, sometimes fatal infections and cancers, including lymphoma, have happened, as have blood, liver, and nervous system problems, serious allergic reactions, and new or worsening heart failure. before treatment, get tested for tb. tell your doctor if you've been to areas where certain fungal infections are common, and if you've had tb, hepatitis b, are prone to infections, or have flu-like symptoms or sores. don't start humira if you have an infection. [ woman ] take the next step. talk to your doctor and visit humira.com. this is humira at work.
10:33 am
with the top speedou compare of comcastvithe top speed of business dsl from the internet... phone company well, there's really no comparison. why pay more for less? call today for a low price on speeds up to 150mbps.
10:34 am
and find out more about our two-year price guarantee. comcast business. built for business. following last week's selloff, our next guest is warning three signs that are flashing that could predict a 20% stock tumble. let's bring in a senior columnist with market watch. he joins us live now on the cnbc news line. mark, good morning to you. >> good morning. >> you say the three warning signs are excessive bullishness, significant over valuation and divergence of different sectors. first of all, why do you get the
10:35 am
sense that there are too many bulls? couldn't you have said that at the beginning of 2011, too? >> yes. i should say, before i discuss that, i'm relying very heavily on research done by hayes martin who works at market extremes and his sole focus is on market extremes, turning points. he's found that any one of these factors alone does not end of increasing the probability of a decline all that much but when you have all three of them together, that is what triggers the expectation that it will have some sort of pullback. and you're quite right, we've had too much bullishness for a few months in a row now. >> what defines this? is this anecdotal? you feel like too many people are positive? >> he looked at a number of indicators and the survey of advisers and indeed it was above the danger level on their survey
10:36 am
by the end of the december. we've had eight months now in which the market has been at or close to the dangerous level of sentiment. that really makes his point that sentiment alone, though it is a dangerous signal, is not reason enough to give up on the bullish trend. when you have all three together, that according to his work, suggests that there's a higher probability of decline. >> when does his research show the last time that we saw a convergence of all three of these factors and what was the result? >> well, in fact, there has only been six times over the last 40 years and they've all been bear markets. the least decline, in other words, the least bad of any of the declines that have fallen in the wake of the simultaneously flashing of all three of these signals was 1998. you may recall we had a very short, a very deep bear market -- i think it was 22% on the s&p intraday from earlier in
10:37 am
the year, march/april period through early october. he thinks that of all of the bear markets he's looked at, the one that most likely is to be the closest analogy to what we're going to see now is something like 1998. >> i just wonder what the ten-year treasury yield was doing during all of these periods. i feel like you can't look at the stock market without looking at these low rates which have been low all year. how much can you rely on this historical information and i know you also look at seasonal information, which is what august does, in this strange world of quantitative easing where they are all in it? >> i asked that very question of mr. martin when i was writing the column and he said he definitely is in awe of this bull market which has been beyond what you would expect by the federal reserve's low interest rate. he said it's because of factors like that that he thinks that
10:38 am
the upcoming bear market will be near the less bad end of the extreme. some of the bear markets that have occurred in the simultaneous firing of these indicators has been at the 50% decline. he's not calling for that but he thinks we'll see 20% in the coming months. >> mark, if he's wrong, he'd add to the growing list of those that have been wrong about this for the last five years. i think a lot of people are fed up from hearing over and over again -- i'm talking about the retail market, people that are worried about these corrections that they keep reading about. why do you think this is important enough that joe public or joe investor who might be on the sidelines now as opposed to saying, okay being sentiment got extreme so why should that be the end of the world? >> that's a very fair question and it's an approach we should take to any stock market
10:39 am
prostig prostignaton. it was confirmed to be done in a disciplined and rigorous way and he looked at only the weed out the werelatively minor events where you have a blip in sentiment. he's looking at a number of extreme events in concert with each other and found whenever they have been there simultaneously flashing, that's been a big warning sign. does that guarantee that the market will decline? of course not. on the other hand, now the phenomena is saying now i'm not going to believe any of the bearish evens. >> that's true. >> you can't take that too far. >> mark, it's provocative research as everyone is trying to predict when the correction
10:40 am
will happen. the dow went negative just a couple of minutes ago. now down 8 points. nasdaq and s&p holding on to very slight gains. >> talking down the markets. >> we will see. stop complaining. that was the president's message to ceos. that's right after the break. we never thought we'd be farming wind out here. it's not just building jobs here, it's helping our community. siemens location here has just received a major order of wind turbines. it puts a huge smile on my face. cause i'm like, 'this is what we do.' the fact that iowa is leading the way in wind energy,
10:41 am
i'm so proud, like, it's just amazing. the ca♪illac summer collection is here. ♪ during the cadillac summer's best event, lease this 2014 ats for around $299 a month
10:42 am
and make this the summer of style. if energy could come from anything?. or if power could go anywhere? or if light could seek out the dark? what would happen if that happens? anything. e financial noise financial noise financial noise
10:43 am
financial noise president obama has made it clear he wants ceos to quit complaining. that was a message in an interview with the economist magazine. listen to his tone during the interview. >> oftentimes, you know, you'll hear some hedge fund manager
10:44 am
say, ah, he's trying to stir resentment. no, feel free to keep your house in the hampton and your corporate jet, et cetera. i'm not concerned about how you're living. i am concerned about making sure that we have a system in which the ordinary person who's working hard and is being responsible can get ahead. and are seeing modest improvements in their life prospects, if not for themselves, then certainly for the next generation. >> steve is the ceo of auto zone and office depot. also, he's the president and ceo of the committee of economic developments. steve, sounding a little populous there. it reminded me of the banker's comment which he had toned down. what do you think? >> i think there's frustration on the part of the administration and with congress that the economy is not growing faster and jobs are for the
10:45 am
being created. look, after the economic crisis of a few years ago, you would expect a much bigger rebound. but our message is back to them that businesses right now are very uncertain. if you look at the number of regulations that are being passed daily, the tens and millions of dollars of fines being levied on businesses but more importantly the uncertainty about washington policy. we've got $17 trillion in debt today and the policies that are in place will lead to very high gdp. >> steve, can i stop you there? everything is always uncertain. it's an executive job to lead during the time of uncertainty. what is really the problem? >> that is not a canard. you need to know what the level is. look at dodd/frank. 500 regulations and they are nowhere near being done. 50 new regulations and they haven't even started. these add costs to businesses.
10:46 am
you're making capital decisions for the next 20 years. you don't know your costs and so you're sitting on $2 trillion with the cash on the balance sheets. you also have the highest tax rate in the world and, yes, a lot of people don't pay it which leads to an unequitable situation. this causes businesses to hedge and that cash is not being invested. >> is it fair to blame the president for that? because in his voice, you heard his frustration and that congress is not working with him, the house of representatives is not working with him. don't you have to blame that? >> listen, i think washington is not working with each other and this is something that we keep encouraging and they are frustrated with each other, they are frustrated with the state of the economy. i think what business leaders are trying to do quietly behind the scenes is we can't run debt up to 80, 85% debt to gdp. when that p has, investors will
10:47 am
invest the $2 trillion. until then, we're going to skate side ways so it comes back to government policy and government and business need to work together. >> steve, what the president seems most upset about is he thinks ceos say one thing publicly and then either push for another in private with him or have their lobbyists pushing in another direction on capitol hill. so what would you say in response to all of that? is that just status quo? is there something new or different or is there a specific example that comes to mind these days? >> no. look, i think it's a real issue. you have businesses through lobbyists and their own washington staffs trying to get tax breaks for themselves and their industries. this is why i think all business people need to rise up in the name of sustained capitalism and advocate for business as a whole and say, look, we feed to lower the tax rates but we need to eliminate a lot of the tax breaks and level the playing field. these are the kinds of things
10:48 am
that i think businesses need to do in order to stage people in the u.s. interests, not just their own interests. >> steve, thanks for weighing in on the topic that everyone is talking about. good to see you, steve odlond, former ceo of office depot. now let's send it over to dom. dom? >> a couple of companies are working on experimental ebola treatments. it's tekmira. it opened strongly in hopes that a trial of its ebola treatment would be reviewed by the fda. it was put on a clinical hold last month. and then there's biocryst to treat a broad spectrum of viruses, including ebola. you can see the shares are still up 3%. still, interesting now the ebola trade, a lot of traders trying
10:49 am
to find a trade or view, if you will, kelly, on what is happening in west africa. >> d ochl m,om, thank you. coming up, formmcteer. and thank you for your bravery. thank you colonel. thank you daddy. military families are uniquely thankful for many things, the legacy of usaa auto insurance can be one of them. if you're a current or former military member or their family, get an auto insurance quote and see why 92% of our members plan to stay for life. in a we believe outshining the competition tomorrow quires challenging your business inside and out today. at cognizant,
10:50 am
we help forward-looking companies run better and run different - to give your customers every reason to keep looking for you. so if you're ready to see opportunities and see them through, we say: let's get to work. because the future belongs to those who challenge the present. with all the opinions about stocks out there, how do you know which ones to follow? the equity summary score consolidates the ratings of up to 10 independent research providers into a single score that's weighted based on how accurate they've been in the past. i'm howard spielberg of fidelity investments. the equity summary score is one more innovative reason serious investors are choosing fidelity. call or click to open your fidelity account today.
10:51 am
that's why i always choose the fastest intern.r slow. the fastest printer. the fastest lunch. turkey club. the fastest pencil sharpener. the fastest elevator. the fastest speed dial. the fastest office plant. so why wouldn't i choose the fastest wifi? i would. switch to comcast business internet and get the fastest wifi included.
10:52 am
comcast business. built for business. welcome back. let's get over to the cme group in chicago. rick santelli with the santelli exchange. rick? >> reporter: thank you. i'd like to welcome robert mctier, served on the fed from '99 to 2004. so 13 years, bob. what do you see that's different with the janet yellen and even ben bernanke fed versus the fed you left before the crisis several years before the crisis? >> yeah, it will be almost -- it's almost ten years since i left, rick. back then, if you had told me that we had 4% gdp growth and 0%
10:53 am
interest rate policy, i would have not believed you. it's sort of like the boiling frog. we made this transition so gradually, we don't quite realize how much has changed. >> reporter: i love your boiling frog analogy. let's leap forward 20 eyears. do you think that the books written about the federal reserve from the period of '07 to basically 2014, maybe 2015, is going to be a story about an institution that was a bit out of control with regard to the power that it saw, it needed to take, and its opinion as an institution during the credit-tight years of '07, '08 and part of '09, or is it going to be basically a manifesto of how the fed turned into an aggressive and stayed aggressive franchise? >> i think it will be more the latter. the fed was late recognizing the seriousness of the situation in
10:54 am
2007. but i think mr. bernanke's actions in 2008 and '09 probably saved us from another great depression. i'm very supportive of that. i think the question is, are we staying a little too long? staying too easy too long? but i think mr. bernanke will get very good remarks -- marks for what he did during the crisis period. >> reporter: well, you know, we could argue about the counterfactuals of whether the fed should have done everything it did. but let's stick with the point of maybe outstaying the weakness and crisis with regard to the economy. i know that the taper's going to continue, and we're not going to see any more quantitative easing. but zero interest rate policy as you referenced, just boatloads of unintended consequences. but it must be more nervous for the fed to acknowledge a balanced approach. do you have any reason not to see them in a more flexible balanced approach?
10:55 am
you raise rates maybe close to 1%, 1.25% and then the watch the economy, tweak it. why can't they be more fluid? >> actually, i've never quite understood why the quantitative easing had to come to an end quite a while before interest rates could begin to normalize. i think interest rates could begin to normalize last year. it probably should never have gone to a quarter. a half to one or one to one and a quarter is very low. and i think then soer we get to that, the better. >> reporter: last week everybody was talking about milton friedman had a birthday. and you were a big advocate and follower of his teachings. my final question, the final 40 seconds, i know inflation to deflation is always a monetary phenomenon. but that doesn't mean we can't mislabel it. i'm sorry, i look at europe, and i think that central banks have caused the downward pressure in prices. i don't think it's labeled as correctly.
10:56 am
your thoughts? >> well, europe may be entering a triple dip recession. and i've heard you talk recently about the dollar versus the euro. and you think it may be more euro weakness than dollar strength. i urge you to look into the wadings of the dxy. europe is way overweighted on that index. >> yeah, it is. listen, we're out of time. >> china and mexico aren't even in there. >> reporter: you're right, it's very, very euro centric. and on that thank you for taking the time this monday morning. and sara, kelly, back to you. >> all right. i'll take it from there, rick. when we come back on "squawk alley," former hp ceo carly fiorina joins us. you won't want to miss this. back in just a few moments.
10:57 am
10:58 am
10:59 am
good morning. it is 8:00 a.m. at disney headquarters in burbank, california. 11:00 a.m. here on wall street, and "squawk alley" is live. ♪ ♪ here i am doing everything i can ♪
11:00 am
♪ moving on to what i am ♪ pretending i'm a superman ♪ i'm trying to keep ♪ the ground on my feet ♪ it seems the world's falling down around me ♪ good morning. i'm kayla tausche. carl quintanilla is off today. that was "superman" by goldfinger, some late '90s. joining us, jon steinberg, jon fortt is with us. guys, we have a busy hour to get to. first up this morning, president obama has an important message to ceos. in an interview with "the economist" magazine, he says they should quit complaining about regulations and show greater social responsibility. let's take a listen. >> the complaints of the corporate community with a grain of salt. if you look at what our policies have been, they have generally been friendly towards bes

54 Views

info Stream Only

Uploaded by TV Archive on